Question

A professor has two daughters that he hopes will one day go to college. Currently, in-state students at the local University pay about $22,112.00 per year (all expenses included). Tuition will increase by 3.00% per year going forward. The professor's oldest daughter, Sam, will start college in 16 years, while his youngest daughter, Ellie, will begin in 18 years. The professor is saving for their college by putting money in a mutual fund that pays about 9.00% per year. Tuition payments are at the beginning of the year and college will take 4 years for each girl. (Sam's first tuition payment will be in exactly 16 years) The professor has no illusion that the state lottery funded scholarship will still be around for his girls, so how much does he need to deposit each year in this mutual fund to successfully put each daughter through college. (ASSUME that the money stays invested during college and the professor will make his last deposit in the account when Sam, the OLDEST daughter, starts college.)

Answer 1

Annual Deposit of $ 29,748.92

A B C D E F G 22112 0.03 1 Annual Expenses 2 Tution Fees Increase @ 3 Sam 4 Ellie 5 Rate of interest 16 18 0.09 6 7 8 Sam Tution Fees PV 9 18 37644.1999 31684.37 Tution Fees PV Ellie 16 35483.2688 35483.27 17 36547.7668 33530.06 18 37644.1999 31684.37 10 19 38773.5258 29940.28 39936.7316 28292.19 11 20 12 19 38773.5258) 29940.28 21 41134.8336 26734.82 13 130638 116651.7 15 16 Total Fund 17 Annual Deposit 18 247289.629 $29,748.92 19 20 21 A B D 22112 0.03 16 1 Annual Expenses 2 Tution Fees Increase @ 3 Sam 4 Ellie 5 Rate of Interest 6 18 0.09 7 Sam Ellie 9 10 Tution Fees PV 16 +$B$1*(1+$B$2)^A9 +39/(1+9%)^(A9-16) 17 +$B$1*(1+$B$2)^A10 +B10/(1+9%)^(A10-16) 18 +$B$1*(1+$B$2)^A11 +B11/(1+9%)^(A11-16) 19 +$B$1*(1+$B$2)^A12 +B12/(1+9%)^(A12-16) +SUM(C9:C12) Tution Fi 18 +$B$1*(1 19 +$B$1*(1 20 +$B$1*(1 21 +$B$1*(1 11 12 13 14 +C13+F13 -PMT(B5,16,B16) 15 16 Total Fund 17 Annual Deposit 18 19 20 21